Are you looking beyond conventional options for saving for your child or grandchild? How about exploring a tax-free scheme that gets you free deposits from the government into the bank account of your child? As a bonus, you wouldn’t have any restrictions on how you use the money.
Well, you might have heard of the Canada Child Benefit program. Simply check this article if you are yet not aware of the CCB. In the past, the Canada Child Benefit program was known as the Child Tax Benefit program. In this article, you will get to know how the scope of this investment plan for children has changed over the years.
A brief history of the Canada Child Benefit plan
The Canadian parliament enacted the Canada Child Tax Benefit in the 1990s with the objective of eliminating child poverty in the country by 2020. After a few years, the scheme was renewed with some scope, including refundable child tax credit, child credit, and family allowance.
As a part of this program, each child could get $1,020 as a unified benefit. The monthly income of the recipient would be exempted from tax.
Later, the federal finance minister of Canada announced that the old Child Tax Benefit policy would be replaced by a new Canada Child Tax Benefit (CCTB) scheme. This policy would combine WIS (Working Income Supplement) and CTB into a single policy so that low-income families would enjoy more benefits. Since 2016, the Canada Child Benefit scheme has been in place.
This is how the Canada Child Tax Benefit policy became the Canada Child Benefit scheme. There was a two-fold purpose working behind the new policy. While it would recognize the parents’ contribution to raising their children, it would also eliminate poverty.
Ultimately, the CCB emerged as a non-taxable, basic, and refundable tax credit to benefit Canadian children.
What is the scope of the Canada Child Benefit policy?
Once the Canada Child Tax Benefit scheme was replaced by the CCB (Canada Child Benefit) program in 2016, middle- and low-income families started benefitting significantly. Compared to the previous system, families with an income of more than $150,000 would receive fewer benefits.
As of 2018-19, the scope of CCB was up to $6,496 a child per year when they were under six years of age. Children between 6 and 17 years would receive $5,481 annually.
The Canadian government primarily designed the CCB based on income. Over the years, this scheme has helped lift more than 300,000 children out of poverty. Between 2013 and 2017, the scheme has helped slash poverty by 40%.
In 2018, the government decided to increase the budget for Canada Child Benefit. As a result, kids under six years of age could not receive a benefit of $6,639 a year. Children aged between 6 and 17 would receive $ 5,602. As a result, the parents would manage the living cost with a better financial flow from the government.
The CCB functions in sync with certain provincial benefits in Canada. Currently, this scheme accounts for 7% of Canada’s federal budget. As per the report of the Canadian government, single parents appear to yield the maximum benefit from these schemes. Evidently, many parents are looking forward to investing in such schemes.
However, there are alternate investment plans designed by some of Canada’s most reliable private companies. Whole life insurance plans happen to be one of the best alternative investment options to secure the future of your child.
Why are more Canadian parents investing in whole life insurance plans for their children?
Apart from the government policies, Canadian parents now have access to some lucrative tax-saving investment schemes for children designed by private firms. If you are looking for an alternative investment scheme warranting both security and flexibility, you should opt for Child Plan™ Participating Whole Life Insurance.
This is a future-proof plan designed to mitigate risks like inflation and uncertainty for children in the coming years.
With Child Plan™ Participating Whole Life Insurance for kids, your children would benefit from annual dividends free from tax as well as guaranteed cash values. Besides, the schemes ensure that the child would benefit from the scheme throughout their life.
Most importantly, there would be no restrictions on how your child can use the amount. In the case of a Registered Education Savings Plan (RESP), you can use the amount provided by the government only for post-secondary education. However, since this is a private plan, the children reserve the freedom to use the funds at their convenience.
What are the key features of this alternative investment plan?
- Any legal guardian of a Canadian child can open the scheme while the child is as young as 14 days old. This might be a grandparent, parent, uncle, aunt, or anyone else.
- Although it would be wise to start investing early, you can open the scheme even after the child reaches 18 years of age.
- The policy offers enough financial flexibility, as you can start investing from just $100 a month.
- Your child can use the amount for any type of financial need, such as down payment for properties, marriage, education, medical emergencies, etc.
- While the investor (parent or grandparent) would enjoy tax benefits on the deposited amount, the child would continue to benefit from the tax-free scheme throughout their lives.
- Since this scheme would be funded permanently after 20 years, parents need not make any further deposits.
- Being a parent, you would enjoy the freedom to control the funds even after you transfer them to your child after they turn 18.
While the Canada Child Benefit plan has already gained popularity, whole life insurance schemes from private companies are emerging into the limelight. Thanks to the freedom they offer in terms of deposits and fund use. Canadian parents are finding lucrative investment opportunities for their children.
Moreover, you would get the tax benefits once you invest in these policies. Strategically, it would be more beneficial for parents as well as kids to go for whole life insurance policies. After all, you would be transferring a lifetime of financial privileges to your child while saving tax.